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Mr. Smith: I understand well why such a case is made, and I listen to it with special care when it comes from the Chairman of the Select Committee. A real danger exists, however, that those who advocate it will contradict themselves. On the one hand, Conservative Members have argued that the system is too complicated, yet now they urge us to add further complexity. All Members will know people whose circumstances have changed and for whom several sets of information would have to be given. Conservative Members should consider again what their party did in office. When the Conservatives faced this issue with family credit, did they provide a year's retrospection? No; they operated normal backdating of a maximum of one month, and people had to show just cause to access it.

Annabelle Ewing (Perth): On that latter point, I find the Secretary of State's answer unconvincing. Surely it does not matter what the Tories did when they were in

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government. Surely it is up to this Government to do better. In any event, my key question concerns the admission by the Secretary of State a moment ago that errors were made. Can we have a statement on whether the Government will pay compensation to those people who have out-of-pocket expenses as a result of the errors that he admitted a moment ago?

Mr. Smith: The hon. Lady said that we ought to do better than the Conservative party, and I certainly agree with her about that. Of course, we are doing better with the new tax credits, which are three times as generous as the family credit arrangements. On compensation, that is governed by an Inland Revenue code of practice, which must apply in this case as in other cases.

We acknowledge the difficulties that have been experienced, and we apologise for the effect on families. Let us also remember, however, that the overwhelming majority of payments were made to families on time and accurately. Performance of the system has improved. The Inland Revenue is clearing many more cases than it is receiving. I have certainly had more positive feedback from constituents and others who appreciate the real difference that the new credits are making to their standard of living and to their child care choices. Building on what has already been achieved through economic stability, 1.5 million more people in jobs, the new deal, the minimum wage, the increases in child benefit—which the Conservatives froze for nearly their whole period in office—the working families tax credit, improved child care and the new tax credits bring further help to families and those on low incomes. They carry forward our drive for a strong society in which everyone has the chance to make the most of their potential, and in which no one is left behind.

Mr. Michael Connarty (Falkirk, East): I applaud the extra £2.7 billion that is going into help for families. Does my right hon. Friend accept, however, that some families—perhaps a larger number than we currently understand—who were on income support and who work for low wages received the tax credit and lost income support? They found themselves paying council tax and rent, and in one case in my constituency they found that they had £60 a week less for their children than previously because of bills coming in and because they had been taken out of income support by the tax credits.

Mr. Smith: I recognise that the movement from welfare to work, which was very difficult under the Conservative party, and which we have improved substantially, involves withdrawal rates, tapers and additional costs. That is why, all the time, we are examining how we can improve the gains to work for those who make that difficult transition. I must say, however, that there is no comparison between the support and the extent of movement from welfare to work under this Government and the abysmal record of the Conservative party. It is the combination of the new deal help, which it opposed, the minimum wage, which it opposed, and the tax credit system, which it opposes now, that makes the difference. Let us remember that we started with the awful legacy of the Conservative years, inheriting a fractured society—[Interruption.] Conservative Members do not like to hear it because it

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is so true. It was a society riddled with divisions and plagued by poverty and social exclusion. Over 18 years, the Conservative party widened the gap between rich and poor, with millions being thrown into poverty.

Sir Nicholas Winterton (Macclesfield): I am listening carefully to the Secretary of State's speech, as I did to my hon. Friend the shadow Secretary of State. Both of them have done a service to the people of this country. Will the right hon. Gentleman not admit, however, that one of the grave problems with the implementation of these tax credits, which I warmly support and with which I agree, is that people lose benefits that they have hitherto received before the tax credits were implemented? People are therefore left with much less income to pay large bills. Will he not only reply to that but indicate whether the Inland Revenue regulations relating to compensation might take that point into account, so that people can get redress for the huge debt that they piled up through no fault of their own?

Mr. Smith: First, I thank the hon. Gentleman for his characteristically kind remarks. I recognise in him and in the spirit with which he addresses this matter a true one-nation Conservative. If more of his right hon. and hon. Friends would listen to him and to that approach, which is designed to build communality and strength in our society, and communality of interest—[Interruption.] I must be careful what I allege that he supports: a strong society in which our interdependence is recognised and in which we help people out of poverty by giving them a helping hand. If he can give me illustrations of the problem of the gap between benefits and tax credits kicking in, I will be pleased to look into them. I know of nothing within the design of the system that allows that to happen or should allow it to happen. Indeed, I know of many instances in which we are operating benefit run-ons to enable people to be assured that they are still getting their benefit income while meeting the costs of taking up a job.

We have been turning things round from the devastation and the division of those Conservative years—[Interruption.] Conservative Members groan, but millions of children grew up in neighbourhoods in which the odds were stacked against them and they were consigned to a life on inadequate benefits. Since 1997, we have started to turn that awful legacy around. For the poorest families in this country—as my hon. Friend the Member for Warwick and Leamington (Mr. Plaskitt) asked and the hon. Member for Havant—was unable to answer earlier-child support was £27.70 a week in 1997. Through child benefit increases and the child tax credit, that will now be £54.10 a week for the first child: a near doubling of support since we took office. With economic stability and growth, we are helping to make work possible through the new deals, the investment in rolling out Jobcentre Plus, expanding child care and tackling the burden of child care costs. More than 180,000 families are receiving an average £41 a week to help with child care. We are helping to make work pay through the minimum wage and reform of taxes and benefits to improve the gains to work, to help with the costs of children and, for the first time, to raise the incomes of those in work without children. The Conservative party really cannot stand the fact that all of this is working. Our policies have got record numbers

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of people into jobs and have meant that 1.5 million fewer children endure the sort of poverty that was experienced during the Tory years.

If all our tax and benefit measures are taken together, an average family with children gains £1,200 a year and the poorest families gain £2,500 a year. We are determined to go further, which is why we have pledged to halve child poverty in a decade and to abolish it entirely in a generation. The British people know that when the Tories oppose the new tax credits, they are opposing the crucial next stage of making work pay and supporting families. It is clear from the debate that the Conservative party stands in the way of opportunity for all and a fairer Britain. We relish the opportunity to argue our case because with a Labour Government and the tax credits, Britain has more jobs and higher living standards. We do not leave the poor behind.

Mr. Willetts: May I make it clear to the Secretary of State that the purpose of the proposal to remove the deadline today is to allow more families to get the tax credit and be sure of the income that he is talking about?

Mr. Smith: That point would have been more persuasive if the hon. Gentleman and his party did not keep arguing and voting against the tax credits and trying to undermine and destroy them. The truth is that as we lead the country beyond the damage and division of the Tory years, our record on making inroads into poverty and raising incomes for all—for the poorest, most of all—is cause for confidence that we will complete our work of building a society of social justice and opportunity for all. That is what the debate is all about: we are in favour of opportunity for all and a fair Britain, but the Conservative party stands in its way.

8.12 pm

Mr. Steve Webb (Northavon): It is quite right that we are debating the administrative shambles of the tax credit system. All constituency Members will have met and spoken to many people who have been unable to get through to the helpline and who have been deprived of money because one benefit has been taken away before the new tax credit has been introduced, leaving them in urgent need. I asked whether that will happen next April following additions for children. I am told that it cannot happen and that people will retain the child element of their income support until their child tax credit comes through. I hope that that happens in practice because it clearly did not happen this time round and many vulnerable people lost out.

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